CLIMATEWIRE | A flood of Chinese solar components is casting a shadow on President Joe Biden's climate priorities.
That's creating deep divisions in the U.S. solar industry and causing political headaches for the president. American manufacturers are calling for additional trade restrictions on Asian imports amid what they say are market-flooding practices by China that are undermining U.S. plans to build a fleet of solar factories.
But those calls are colliding with the interests of some renewable energy developers that rely on China-linked companies for components that are fueling a solar building spree in the U.S. They contend new trade barriers could hinder U.S. efforts to eliminate climate pollution in the electricity sector — a pillar of Biden's environmental agenda.
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The solar standoff underscores Biden's precarious balancing act as he races toward the presidential election.
The Inflation Reduction Act, the sweeping climate law signed by Biden in 2022, lavishes tax breaks on companies to build the solar supply chain in the United States. Slowing foreign imports could help create demand for domestic components. But it could also hurt Biden's other priority: achieving 100 percent carbon-free power by 2035 — a promise that analysts say can't be met without a full-speed buildout of renewable energy.
That might not be possible without imported solar products.
“There’s numerous examples of the conflict between President Biden’s decarbonization agenda and his deglobalization agenda,” said Tim Fox, an analyst who tracks the industry at ClearView Energy Partners. “You want to decarbonize with available and cheap solar panels. But you also want to develop solar here at home. There is tension between those two efforts."
The situation came to a head this week when seven U.S. solar manufacturers filed petitions with the federal government requesting an investigation into whether the budding U.S. industry is being harmed by what they say are unfair trade practices from China-linked companies operating in Cambodia, Malaysia, Thailand and Vietnam.
The manufacturers argued that companies in Southeast Asia are benefiting from foreign subsidies, and exporting below-cost solar components into the U.S. market. That should make them subject to higher tariffs, the manufacturers said.
As a warning of what might come, they pointed to an announcement earlier this year by CubicPV, a Massachusetts-based solar manufacturer that scrapped plans for a massive factory after citing a “collapse” in prices and surging construction costs.
“We're at a real inflection point now for developing clean energy manufacturing in the United States,” said Scott Paul, president of the Alliance for American Manufacturing. “The presence of the massive amount of industrial overcapacity China has in solar, in [electric vehicles] and related industries is a real threat, and we know this because we've seen this play out before in the United States and in other industries. It doesn't end well.”
'Green trade war'
The use of trade barriers has long been opposed by developers, who say higher prices driven by tariffs could slow U.S. solar growth and make it more expensive to address climate change.
Kevin Hostetler, CEO of Array Technologies, a provider of utility-scale solar trackers, a technology that turns panels toward the sun, said the manufacturers’ trade petition creates “a level of uncertainty and delay” that negatively impacts the U.S. solar industry.
“We just simply don't need the short-term shocks to the system that may benefit one or two particular companies, but then harm the broader industry over the course of what could be multiple years,” he said.
A statement attributed to a White House spokesperson said the administration won’t weigh in on the petitions, but it pointed to “historic investments” in the solar industry under Biden. The administration is also monitoring potential unfair market practices by China in solar and other sectors.
“As President Biden has made clear, his administration is keeping all tools on the table to support the unprecedented investments secured by the President’s agenda and take action to protect American workers and manufacturers against unfair competition,” the statements said, adding that Biden is committed to expanding solar deployment.
The solar battle is part of a wider spat between the U.S. and China — that members of the Biden administration are increasingly acknowledging.
As China’s domestic real estate market has cooled, the country has leaned heavily on its manufacturing sector to bolster economic growth. Wood Mackenzie, a consulting firm, estimated that Chinese firms make 80 percent of the components in a solar panel, such as polysilicon, wafers, cells and modules.
At the same time, S&P Global Market Intelligence said an “unprecedented wave” of imported solar panels — linked largely to China-based companies operating in Southeast Asia — came into the U.S. in 2023. Cambodia, Malaysia, Thailand and Vietnam together accounted for 84 percent of U.S. solar panel imports in the fourth quarter of last year.
In Europe, China’s dominance and the supply glut of cheap solar panels has already left manufacturers unable to compete. The surge in foreign panels has the potential to stymie a boom in U.S. solar manufacturing launched by the IRA.
U.S. companies have announced plans to build factories capable of churning out 140 gigawatts of solar module capacity, Wood Mackenzie said. But only half of that is likely to be built by 2027, said Elissa Pierce, an analyst who tracks solar manufacturing at the consulting firm. Factories that build subcomponents that go into panels face even bigger hurdles. Of the 61 GW in announced wafer facilities, Wood Mackenzie said only 3.3 GW would be built. Less than one-quarter of the announced cell manufacturing facilities is actually expected to come online.
“There is a growing transition from a traditional trade war to a green trade war,” said ClearView’s Fox.
Biden administration officials have sharpened their rhetoric in recent weeks.
"It's important that China recognize the concerns [and] begin to act to address it," Treasury Secretary Janet Yellen said this week. "But we don't want our industry wiped out in the meantime, so I wouldn't want to take anything off the table."
Yellen recently traveled to China to discuss the administration’s concerns.
'No objective answer'
A similar fight in 2022, over China funneling U.S.-bound products through Southeast Asia, left some manufacturers frustrated and prompted a presidential veto. This time could be different.
“I can safely say I've never filed a trade case before where there were such strong statements of support in terms of the need to address Chinese dumping, in particular in the renewable energy sector, as we've had in recent weeks,” said Tim Brightbill, co-chair of Wiley Rein’s international trade practice and lead counsel in the manufacturers’ recent petitions.
Those petitions, filed Wednesday, are backed by First Solar, Qcells, Meyer Burger, Mission Solar, REC Silicon, Convalt Energy and Swift Solar — many of which have announced new expansions or investments since passage of Democrats’ climate law.
It comes on the heels of a request from Qcells, a South Korean solar maker that has invested $2.5 billion in new factories in Georgia, to end an exemption under an existing tariff regime on bifacial solar panels.
The company said double-sided modules now compose over 98 percent of U.S. solar module imports — meaning less than 2 percent of imports are subject to duties. The administration is reportedly planning to soon grant that request.
Brightbill called the IRA “a once-in-a-lifetime opportunity to reclaim the solar supply chain and the solar manufacturing process here in America.” But, he added, “you have to not just have the investment, you have to have enforcement as well.”
But the petitions received an icy response from the industry’s largest trade groups.
In a joint response Wednesday, the Solar Energy Industries Association, American Clean Power Association, Advanced Energy United and American Council on Renewable Energy expressed concern that the trade petitions “will lead to further market volatility across the U.S. solar and storage industry and create uncertainty at a time when we need effective solutions that support U.S. solar manufacturers.”
The administration has also faced bipartisan pressure from lawmakers to take additional steps to support the domestic industry. That’s included calls to better incentivize purchases of U.S.-made solar components through stronger tax credits, and to further address stockpiling of Chinese-linked products.
“China is running the same playbook Ohio steelworkers know all too well, routing their products through other southeast Asian countries to try to get around the rules,” Ohio Sen. Sherrod Brown, a Democrat who is facing a tough reelection race, said in a statement. “The Administration cannot let them get away with it.”
The administration last year determined Chinese companies were funneling solar products through Southeast Asia in order to avoid tariffs. Then it did the opposite of what many manufacturers had hoped: It placed a two-year moratorium on new tariffs, after the initial inquiry prompted months of infighting within the solar industry.
The moratorium ends in June, and duties on solar modules are expected to resume for companies that are circumventing tariffs. “We will enforce that rigorously — including ensuring that imported panels are not being inappropriately stockpiled,” a White House official told POLITICO, speaking anonymously to abide by administration guidelines.
Antoine Vagneur-Jones, head of trade and supply chains at BloombergNEF, said the U.S. faces a choice. He pointed to Europe as an example of the stakes. Solar modules there are roughly half as expensive as those in the U.S., due to a lack of trade barriers. Yet European solar factories are closing, leaving the continent almost entirely dependent on China for solar equipment.
Adopting tariffs could help expand factories in the U.S., creating jobs and political support for the industry, he said. But it will mean higher costs for solar panels as critics contend that cleaner energy sources is already too expensive.
“Are you prioritizing speed? Are you prioritizing not being entirely reliant on one region? Those are value judgments,” Vagneur-Jones said. “There is no objective answer.”
This story also appears in Energywire.
Reprinted from E&E News with permission from POLITICO, LLC. Copyright 2024. E&E News provides essential news for energy and environment professionals.